Market Analysis: Weak Demand Recovery, Limited Space For Cotton Prices To Rise

Domestic cotton consumption is characterized by low peak season. The data shows that the cotton import volume from January to February decreased by 370000 tons to 270000 tons on a year-on-year basis. Textile enterprises mainly purchase from rigid demand and are cautious about replenishment. Pure cotton yarn market turnover was light. The average price of C32S combed yarn was 21067 yuan/ton, a slight drop of 0.2% compared with the previous week. There were few new orders for downstream grey cloth, and the enterprise profit was under pressure. In April, the Trump government's proposed reciprocal tariff policy became the short-term focus. If the policy is implemented, it may further inhibit textile exports and increase the pressure on external demand.

In terms of American cotton, the export task of the year 2024/2025 has been basically completed, but recently the weekly contracted volume has dropped 63% month on month, and China has continuously cancelled orders. The market focus turns to planting in the new year. The US Department of Agriculture's supply and demand report predicts that the US cotton planting area will decrease by 10.6% to 10 million acres in 2025/2026, the lowest level since 2015.

At present, the soil moisture in the main production areas of American cotton is biased, and the dry area in the southeast and Texas accounts for 33%. If the weather continues to be unfavorable during the planting period in April, the yield may be further damaged.

In Brazil, CONAB's latest forecast is that the cotton output in 2024/2025 will be 3.822 million tons, an increase of 60000 tons over the same period last year. However, the market institutions believe that the delay in planting in Mato Grosso, the main production area, and the rise in corn prices may lead to the actual cotton area being lower than expected, so the cotton output is at risk of decline. In February, Brazil's cotton export volume was 275000 tons, an increase of 6.4% year on year. China's purchase volume was only 29900 tons, and the focus of demand shifted to Pakistan and Bangladesh.

In the short term, affected by weak domestic demand and international policy factors, Zheng Mian will continue the trend of interval shocks. If the US cotton planting intention report in April confirms that the area is significantly reduced, it may support the rebound of international cotton prices. On the domestic side, the transmission effect of consumption promotion policies and tariff implementation rules will dominate the direction of cotton prices.

In the medium and long term, the global cotton supply and demand structure is still expected to be loose. Brazil's high yield, domestic production increase and demand recovery are weak. The upward space of cotton prices is limited. Pay attention to changes in weather and policies.